Some employers say they may cancel future expansions in California if state officials hike payroll taxes under a proposal from Gov. Jerry Brown.

The money would help retire $10 billion owed by the state’s unemployment insurance fund to the federal government. The state of California ran up the debt during the recent recession when jobless rates soared and the state faced an avalanche of unemployment claims. The California Employment Development Department, which manages the unemployment insurance fund, had to borrow money from the federal government to continue paying benefits.

California’s business owners currently pay taxes on the first $7,000 earned by each of their workers. Rates hover between 3 and 6 percent, based on a company’s age and employment record. Firms with more layoffs usually pay a higher rate. Companies pay a maximum tax of $434 per employee — the second lowest in the country, according to EDD.

Under Brown’s proposal, that amount would rise. His administration wants to raise the $7,000 taxable ceiling on workers’ wages, which is the federal minimum, to $12,000 over two years. Tax rates also would rise, although the administration didn’t provide specifics. The modified tax ceiling on salaries would pay back the federal loan and create an $11 billion surplus in the unemployment insurance fund by 2021.

Some employers are disappointed with the proposal. They say raising the taxable wage ceiling poses another hurdle to doing business in California.

“I think the economy is still somewhat fragile,” said Mark Morrow, chief financial officer for RagingWire, a data center company based in Sacramento. “I think you’re encouraging companies to have fewer employees.”

Morrow said RagingWire, which has about 280 employees, is growing and will eventually need to expand. He believes higher payroll costs could eventually force the firm to expand in other states such as Texas that have better incentives for data centers. The Golden State’s high cost of doing business already has the company rethinking any long-term building plans in Sacramento.

“We will certainly looking at different geographic regions,” he said. “That’s not a threat. It’s just reality.”

Colleen Gray is another Sacramento executive who’s worried about the proposal, which could advance to the Legislature later this summer. Gray, the CEO and president of Consensus Orthopedics, a medical manufacturing firm based in El Dorado Hills, said the tax hike would penalize companies that didn’t lay off employees during the recession.

“I would just like companies that didn’t go through that type of activity to get a break, because we didn’t help create that deficit,” she said.

Consensus Orthopedics, which employs 88 people in California, probably wouldn’t move because of the cost increase, according to Gray. But the new payroll ceiling would hurt. “It’s not debilitating, but it starts to feel like there’s one after another changes that affect your business,” she said.

But officials say California’s system of taxing payrolls is woefully outdated and hasn’t been changed since 1984. Arizona is the only other state with the $7,000 federal minimum on taxable wage ceilings.

Kevin Callori, an EDD spokesman, said the Brown administration has briefed business and labor groups, but there haven’t been further negotiations.

“At this time, some legislative consultants have been briefed on the elements of the proposal and other consultants are scheduled to be briefed in the coming days,” he said in an email.